Falling from the altar! Shenzhen's big seller lost more than 300 million yuan in a failed bet

Recently, many cross-border sellers have released their 2022 report cards, and their performance has fluctuated to varying degrees.

The joys and sorrows of big sellers are not the same. Some make billions while others continue to suffer losses.

Tongtuo Technology's parent company, Huading Holdings, announced its 2022 performance report. While its revenue fell sharply, it also faced huge losses.

Tongtuo Technology’s annual loss exceeded 300 million yuan!

According to the published data, Huading shares achieved operating income of approximately 6.548 billion yuan in 2022, a decrease of 24.33% from 8.654 billion yuan in the same period of 2021. The net profit attributable to shareholders of the listed company was approximately 429 million yuan, and the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was -343 million yuan.

At the end of 2022, Huading Group's total assets were approximately 5.602 billion yuan, a decrease of 7.67% from the end of the previous year; the net assets attributable to shareholders of the listed company were approximately 3.907 billion yuan, an increase of 7.74% from the end of the previous year.

Huading shares stated that there are three reasons for the changes in the company's performance:

1) During the reporting period, the company received the repayment of the principal and interest of the funds occupied by the third party designated by Sanding Holdings' bankruptcy reorganization investor, Zhenai Group Co., Ltd. After the funds occupation issue was resolved, the company reversed the bad debt provision of RMB 591 million previously made and included it in the company's profit and loss in 2022 .

2) The company completed the repurchase and cancellation of performance compensation shares, and confirmed that the proceeds of RMB 150 million from the performance compensation repurchase shares were included in the company's profit and loss for 2022 .

3) In 2022, the company's cross-border e-commerce business was affected by the shrinking demand caused by the global economic downturn , the Amazon incident , and the platform's VAT withholding policy , resulting in a significant decline in revenue . At the same time, coupled with asset impairment provisions such as the Paypal incident, the company is still in a loss-making state .

In addition to the 2022 financial report, Huading Holdings also disclosed the company's first quarter 2023 performance report.

From January to March 2023, Huading's revenue was 1.545 billion yuan, down 1.5 % from the first quarter of last year ; net profit attributable to shareholders of listed companies was 5.398 million yuan, up 107.08 % from the first quarter of last year . Although Huading's revenue in the first quarter declined slightly, its net profit increased significantly.

Compared with 2022, Huading Holdings' operating conditions have improved.

The love-hate relationship between Tongtuo and Huading started six years ago. As early as 2017, Huading acquired 100% of Tongtuo Technology at a super-high valuation of RMB 2.9 billion, and signed a three-year gambling agreement with Tongtuo's original shareholders Tongwei Investment, Zou Chunyuan and Liao Xinhui.

Except for 2017, when the requirements were met, the bet failed in other years, and the founder had to pay high compensation. At the same time, in 2021, Tongtuo Technology was affected by the Amazon account blocking wave, and a total of 54 stores were banned and closed, and the frozen funds reached 41.43 million yuan. In March 2022, the PayPal account tied to the independent station was frozen, and the funds in the account were deducted by tens of millions of yuan.

In 2022, Tongtuo Technology failed to reverse the trend of losses, with the annual loss amount reaching 316 million yuan.

According to the performance compensation agreement, the listed company repurchased a total of 37,328,847 shares of the company from the performance commitment parties at a total price of RMB 1. The equity held by these management teams, which was worth nearly RMB 150 million at the time, was handed over at a price of RMB 1 and included in the annual profit and loss of the listed company.

It is indeed regrettable that more than 37 million shares were repurchased at only 1 yuan.

The continued losses have also prompted Huading to start making new plans in the cross-border e-commerce sector. Huading said that in the future, the company will seek new breakthroughs with innovative models on the basis of stabilizing its main business income, and plans to enhance the comprehensive competitiveness of its cross-border e-commerce ecological services. From this, it can be seen that Huading plans to expand its business into the field of ecological service providers.

What happened to those big sellers who signed the bet agreement?

Many big sellers in the industry will sign gambling agreements. Those who win the bet will make a lot of money, while those who lose the bet will often suffer heavy losses.

Recently, Yibai Network released its 2022 financial report, with a full-year net profit of 288 million yuan, successfully completing the bet.

Previously, Yibai Network and Huakai Creative signed a performance betting agreement, stipulating that the non-GAAP net profit for 2019, 2020, 2021, 2022 and 2023 will not be less than 141 million, 170 million, 204 million, 251 million and 290 million respectively.

It is understood that Yibai Network has exceeded its bet for four consecutive years, with its non-GAAP net profit reaching 175 million, 363 million, 215 million and 288 million yuan from 2019 to 2022 respectively.

In 2022, Yibai Network's revenue was 4.384 billion yuan, and its net profit was 288 million yuan, exceeding the promised amount by 22.8559 million yuan, completing 109.11% of the forecast profit for this year. Among them, Yibai Network's sales revenue on Amazon was 3.480 billion yuan, accounting for 78.79% of its operating income, and the total number of orders reached 25.0128 million, with an average order amount of 139.14 yuan.

The category that contributes the largest revenue to Yibai Network is home gardening, with sales revenue of 1.014 billion yuan in 2022.

Overall, Yibai Network's development momentum continues to improve. At the same time, the company is also actively exploring platforms such as Walmart to open up new markets.

It can be said that some are happy while others are sad, and where there are successful bets, there will inevitably be those who fail.

In addition to Tongtuo Technology, another company that failed in the bet was Jiazhilian.

According to the latest announcement released by Xunxing Co., Ltd., the parent company of Jiazhilian, Jiazhilian mainly sells products through sales channels such as Amazon and Shopify independent stations. In 2022, it achieved online sales revenue of approximately 393 million yuan, compared with the e-commerce brand trade revenue of 521 million yuan in 2021, a year-on-year decrease of 24.56%. In addition, Xunxing Co., Ltd. stated that the total profit of the company's cross-border e-commerce business in this period was -68.4702 million yuan, a year-on-year decrease of 592.38%. In other words, in 2022, Jiazhilian's revenue and profits both declined.

Since the bet with the parent company, Jiazhilian has been in continuous losses. Jiazhilian fell into the curse of losses in the first year of the bet with the parent company. Under the impact of Amazon's account suspension, further losses in 2022 are an inevitable outcome. From 2018 to 2022, there have been losses for five consecutive years. The former general manager Gan Qingcao fled abroad and refused to implement the effective ruling. Last year, the company's website password was changed, resulting in the inability to withdraw 8.91 million yuan. In addition, it was blocked by Amazon, and the former top seller's glory is gone.

At present, the board of directors of Xunxing Co., Ltd. has set up a special debt recovery team and commissioned professional lawyers to actively search for the property of Gan Qingcao and Zhu Ling.

Many big sellers in the industry have signed gambling agreements, but gambling has huge benefits and high risks. Once the business environment changes and the gambling conditions cannot be met, the company will have to cede a large amount of equity and pay out of its own pocket to compensate the investor, which is not worth the loss.

Therefore, for these sellers, it is necessary to learn how to deal with capital and make reasonable plans to obtain greater value in the bet.

Tongtuo Technology

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